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Medical aid benefits in the firing line again

Dec 09 2016 10:38
Susan Erasmus

Cape Town - The council for medical schemes has announced that the Health Department has not accepted its proposed revision of Prescribed Minimum Benefits (PMBs).

The possibility of low-cost benefit options on your scheme, which don’t cover all treatment for PMBs, has just moved further into the future, as the National Department of Health rejects the proposed revisions on PMBs by the CMS.

According to the Medical Schemes Act of 1998, the PMBs are subject to review every two years.

What are PMBs?

There are 270 PMBs and 26 chronic conditions, for which all medical schemes and hospital plans have to cover their members with regards to diagnosis, treatment and care.  Twenty seven chronic conditions also have to be covered. (Click here to see the full lists of both PMBs and Chronic Conditions)

Whether the future holds a reduction in schemes’ liability to fund PMBs, or an increase, is difficult to tell at this point. The Hospital Association of South Africa has expressed concern about a possible reduction in members’ medical cover.

There are multiple reasons why PMBs have been in the news this year.

No limit to schemes’ liability for PMBs

The Medical Schemes Act states that members of all medical schemes have to be covered for these PMBs at cost regardless of where the treatment has been obtained. Private doctors and private hospitals can and do charge prices for these services that are sometimes very far beyond medical fund tariffs on some of the options on individual medical schemes. 

In March this year the Constitutional Court ruled that schemes have to foot the bill in full, and the application by Genesis Medical Scheme to limit their liability for payment of PMBs was dismissed.

Medical schemes and members under financial pressure

The high cost associated with the treatment of PMBs at cost, has put many medical schemes under financial pressure, with fewer than a third of them breaking even in 2014, according to a report by Alexander Forbes.

This, together with rising hospital and medication costs, as well as the increasing costs of medical equipment, have all contributed to mostly double-digit contribution increases for 2017 for most medical scheme members.

Medical inflation runs at almost double CPI inflation, not only putting existing medical scheme members under pressure, but discouraging younger or any other new members to join. This in itself threatens the survival of medical schemes, as there is less cross-subsidisation between the young and the old, the sick and the healthy – and the average age of scheme members is on the increase.

Medical scheme membership has remained relatively static over the last 20 years, with a total increase of only 1.4 million medical scheme members.

PMBs a ‘blank cheque’ to private health care?

High costs of private hospitals and doctors have been criticised by the Minister of Health on several occasions, and he has lamented the fact that the high cost of medical scheme membership has placed it out of the reach of the majority of South Africans.

Clearly, on the one hand, the Health Department would like to see a reduction in the costs of private health care, an industry which has often been criticised for being profit-driven. But on the other hand, the Medical Schemes Act is interpreted by the Council of Medical Schemes, the regulatory body of the medical schemes industry, as stipulating that the PMBs have to covered at cost.

In short it appears the Health Department is caught between a rock and a hard place. It wants to reduce costs of private health care end medical scheme membership, but changing the level of liability of the schemes to fund the PMBs would mean serious changes to existing legislation.

Regulation 8.1 of the Medical Schemes Act states: “Subject to the provisions of this regulation, any benefit option that is offered by a medical scheme must pay in full, without co-payment or the use of deductibles, the diagnosis, treatment and care costs of the prescribed minimum benefits.”

It isn’t clear whether the legislators, whose original intention was presumably to protect the rights of medical scheme members, intended this to be treated ‘as a blank cheque’ for the private healthcare industry, to quote Motsoaledi in his criticism of this healthcare sector.

Possible change to Medical Schemes Act

In order for schemes to offer members low-cost benefit options, the legislation as it stands would have to be changed.

It is with this in mind that the CMS is embarking on a process to review PMBs – and possibly to accommodate low-cost options within the industry and under the Medical Schemes Act.

The CMS is currently looking at the following four issues:

  • Inconsistencies or flaws in the current regulations;
  • The cost-effectiveness of health technologies or interventions;
  • Consistency with developments in the health policy; and
  • The impact on medical scheme viability and its affordability to members

Why the Health Department rejected the current revisions

After the previous review of PMBs, the National Department of Health (NDoH)did not approve the proposed revision of the PMBs. Its objections were based on the ‘hospicentric nature’ of the revisions, and it also questioned whether the current health needs of the country were being prioritised. The NDoH  also stated that the criteria for inclusion and exclusion of some of the PMBs were not clear.

The long-term aim is to align the private sector package with the public sector package in the transition period towards the implementation of the National Health Insurance, according to a press release from the CMS.

The way forward

The consultative process, which will include engagement with stakeholders (such as the Hospital Association of South Africa, medical schemes, public health specialists, actuaries and so forth), appointment of committees, a workshop on PMBs, data collection stakeholder consultation, is expected to last for much of 2017. It is hoped that it will lead to the drafting of new regulations on PMBs by March 2018.

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